In the recent budget, the Chancellor of the Exchequer announced that the CRC Energy Efficiency Scheme would continue to run to the end of the current Phase in March 2019.
The uncertainty caused by last year’s consultation on the business energy use taxation landscape, followed by the budget announcement meant that, for the millionth time, hopes of the early demise of the CRC were greatly exaggerated.
However, this uncertainty led to many participants sitting on the proverbial fence when it came to deciding their allowance strategy for 2016-17 and beyond.
Now that the CRC’s immediate, if short, future has been confirmed, all crystal balls can be put to one side, and the serious matter of CRC allowance purchase can recommence.
So what does this mean?
CRC Scheme Year | Forecast Sale Price | Compliance Sale Price |
2015/16 | £16.90 | |
2016/17 | £16.10 | £17.20* |
2017/18 | £16.60* | £17.70* |
2018/19 | £17.20* | £18.30* |
* Budget 2016 announced that sale prices would increase by RPI up until the closure of the scheme at the end of the 2018/19 compliance year – the provisions to enact the prices marked with a * set out in the table above will be made in due course, subject to Parliamentary approval.
Should I purchase allowances in advance?
Evidently, cash that is used for the forward purchases of allowances will no longer be available for other uses.
However, when building a business case for forward purchases, CRC participants may wish to consider
For the 2016-17 compliance year you can now choose to:
Indicative potential savings
If, in the 2015-16 compliance year, your CRC emissions were 10,000 tonnes, and if your requirement was the same for the 2016-17 year, buying allowances in the Forecast sale window could save you £1.10 per allowance, a total saving of £11,000.
In addition you could buy allowances for the 2017-18 and 2018-19 years with projected savings of £1.60 and £2.20 respectively per allowance (subject to RPI increases) – this equates to potential savings of £16,000 and £22,000 respectively, based on this 10,000 tonne example.
Reforming the business energy efficiency tax landscape
On a final note, the government will consult later this year on a simplified energy and carbon reporting framework, to be introduced in April 2019. However, the Chancellor has already indicated that from April 2019, the main rates of the CCL will increase and the rates of CCL applied to gas and to electricity will be “rebalanced” over time to eventually reach a ratio of 1:1 by 2025. This could present a rather nasty surprise to those companies who use a lot of gas. To protect the most energy intensive sectors, the CCL discount available to Climate Change Agreement (CCA) participants will increase from April 2019. For all other large gas users, no such discount will apply.
If you have any questions about the CRC or corporate energy tax landscape, get in touch.
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